KPMG Personalization

Notice of updates
!

Since the last time you logged in our privacy statement has been updated. We want to ensure that you are kept up to date with any changes and as such would ask that you take a moment to review the changes. You will not continue to receive KPMG subscriptions until you accept the changes.

Hi
!

Our privacy policy has been updated since the last time you logged in

We want to make sure you're kept up to date. Please take a moment to review these changes. You will not receive KPMG subscription messages until you agree to the new policy.

Despite uncertainty, US chemical companies optimistic

Related content

Uncertainty is the only certainty for today's US chemical industry. A new administration in Washington DC is attempting to loosen regulations, change tax laws and adopt new Federal policies designed to promote business growth. At the same time, this administration has suggested that increased tariffs and a renegotiation of international trade agreements would benefit the US economy, even though trade barriers might curtail export/import growth in US chemicals. Nevertheless, the US chemical industry remains greatly favored by low feedstock and energy prices, a strong domestic economy, and a business-friendly government agenda, all of which justify continued optimism about industry revenues and growth.

An engine for growth

The US chemical industry remains a steady engine of economic growth for the nation's economy, with 10,000 firms producing 70,0001 products. According to some analysts, US chemical industry volumes, excluding pharmaceuticals, are expected to rise by 3.7 percent in 2017 and then increase by 4.5 percent in 2018 as new capacity comes online2. By 2020, the industry is expected to deliver USD1 trillion in revenues3.

Strong fundamentals across the economy

The US economy remains in relatively good shape for 2017. According to the US Department of Commerce, real gross domestic product (GDP) increased at an annual rate of 3.3 percent in the third quarter of the year4. Consumer confidence remains steady and the Purchasing Manufacturers Index (PMI) suggests continued demand5.

Oil and gas prices favor US chemical companies

As of October, 2017, most analysts expect oil to remain in the USD50 to USD60 range, about half the price of crude before 20146. If crude prices tick upward, chemical manufacturers in the US will gain more of an advantage because their facilities use natural gas as a feedstock and energy source.

Regarding natural gas, the continued availability of this resource in the US, mostly from shale deposits, shows no signs of letting up. Competitively-priced natural gas and ethane are enabling US chemical companies to build plants, expand, or improve their facilities.

Changes in environmental regulations

A sea change has occurred across the US regulatory landscape, and US chemical companies are encouraged by the possibility that many regulations will be modified to both increase their effectiveness and support business growth. During his first 100 days in office, President Trump has rolled back nearly two dozen environmental rules, regulations and other Obama-era policies7.

Looking ahead

Overall, the chemicals industry could be looking at a `perfect storm' of opportunity in North America --but in some ways, it might also be a `zero-sum game.' Circumstances that benefit North America may in turn have a negative impact in other markets around the world, which could result in higher prices, tariffs or increased transportation costs. The impact these dynamics could have on trade agreements is still completely unknown.

Chemical industry executives trying to strategize what a Trump presidency means for their company need to be thinking about all these conditions --including how markets interact on a global level --so they can design business models and tax strategies to position their companies to compete with agility in uncertain times.